AUSTRALIA

Packer reveals his cards

James Packer’s Crown Resorts has become one of the gaming industry’s prized takeover targets after the company disclosed it had been in talks with Wynn Resorts about a potential acquisition.

Crown’s premature disclosure of those talks sent Wynn running for cover, though investors still seem to judge that a deal...with someone... may be on the cards.

The stock, which had been languishing near 52-week lows jumped 20 percent the day after Wynn’s approach was revealed. Although news the talks had failed predictably sent the shares back down to earth, they didn’t give up all of their gains as investors bet another suitor will step forward sooner or later. Some are even betting Wynn will come back to the table.

“I think this is very much a tactical play on Wynn’s behalf,” Adam Dawes, senior investment advisor at Shaw and Partners, told CNBC television. “I think they let this deal fall over but we do feel this deal will eventually happen.”

The Las Vegas-based company had offered A$14.75 a share in a mixture of cash and stock in a transaction worth about $10 billion ($7.1 billion).

The purchase would have added Australia’s Crown Melbourne and Crown Perth integrated resorts to Wynn’s portfolio as well as Crown Aspinalls in London. The Australian operator is also building Sydney’s first six-star property on the waterfront at Barangaroo that will be restricted to table games only and targeted mainly at Asian VIPs. Crown also possesses a growing online business, including Betfair, DGN Games and Chill Gaming.

Some analysts saw the approach as a defensive move by the U.S. operator to gain critical mass to avoid becoming a takeover target itself. It also marks a significant change in strategy for Wynn, which has in the past been a builder of assets and not a buyer.

Fitch Ratings director Colin Mansfield said the ratings agency believes the acquisition would have been positive for Wynn, providing the company with a portfolio of high-quality assets in a market it has no presence.

“When we first heard the news of the transaction, our first initial response was that the addition of the assets of Crown to Wynn’s overall portfolio would be a positive thing for Wynn from ... both an operational and a strategic perspective,” he said on CNBC’s Squawk Box.

However, others expressed scepticism, warning about the U.S. operator’s lack of knowledge of the Australian market and the possibility of becoming bogged down in the country’s notoriously strict probity process.

For Crown, the tie up could have made good business sense. The company has been without a presence in Macau since exiting its joint venture with Melco Resorts & Entertainment in 2017 and will be relying heavily on Chinese high rollers to fill its Sydney property.

The group retrenched its international positions after 19 of its employees were arrested in China in 2016 on gambling-related charges. Those arrests caused the group’s VIP business to plunge and although there was subsequently a rebound, concerns are mounting again due to the slowdown in the Chinese economy.

If Wynn is definitively out of the picture, Deutsche Bank analysts pointed to Hard Rock and Genting as likely partners, while others have said it may be a consolation prize for those who fail to gain a coveted Japan license.

“For businesses already operating in the region, it makes sense too, to consider the deal,” Delta State Holdings managing partner David Bonnet was cited by local media as saying. “Acquisition is the only way to enter a monopoly-style market.”

James Packer, through a private holding company, still owns 46 percent of Crown, even though he gave up his seat on the board last year. His representatives have not commented publicly on a potential sale, though Bloomberg cited biographer Damon Kitney as saying this was a clear sign the billionaire was “putting up his hand and saying I’ve had enough of the spotlight.”

Any potential buyer therefore will need to convince Packer they are the right suitor, which brings the circle back around to Wynn. The Australian and Wynn founder Steve Wynn are known to have good relations dating back many years and this could give Wynn the advantage.

Australians gambling less, survey finds

There has been a large drop in the number of Australians who gamble, falling to 47.9 percent of the population, or 9.3 million, compared with almost two thirds of adults a decade ago, according to a survey by Roy Morgan.

The survey is based on face-to-face interviews with more than 50,000 consumers in their homes. It began in 2002. This year’s survey found that there has been a decline in participation in all types of gaming, though the biggest drop was for lottery and scratch tickets, which are the most popular gaming category.

The participation rate declined 16.3 percentage points to 40.1 percent. Those playing pokies dropped by 11. 9 percentage points to 13.7 percent, followed by betting down 5.9 points to 9.4 percent.

Younger Australians were the least inclined to gamble, with participation in the 18 to 24-year age group at just 25.7 percent, followed by the 25 to 34 segment at 37.5 percent.

Levy to take helm at Ainsworth

Ainsworth Game Technology has appointed former Novomatic vice president of global sales, Lawrence Levy, as chief executive officer.

The appointment will take effect on July 1st and Levy will receive an annual base salary of AS$700,000. He will also be entitled to an “at risk” bonus of $300,000 per year and a long-term incentive of $100,000. Levy has held senior positions within the gaming industry over a successful career spanning 37 years.

“Lawrence is a highly respected and experienced gaming executive and I am confident that he will further assist the company achieve its strategies to become a leading provider of innovative gaming technology to the global market,” said Ainsworth Chairman Graeme Campbell.